Comprehensive Guide to Recruitment and Employment in Vietnam

I. National and Economic Background: Southeast Asia’s Manufacturing Star

Vietnam is located in Southeast Asia, with a population of approximately 100.4 million, boasting a young and rapidly growing demographic structure. Its capital is Hanoi, and its economic center is Ho Chi Minh City. Vietnam is a member of ASEAN and 15 free trade agreements such as RCEP, enjoying significant tariff preferences and market access conditions, making it a key node in global supply chain layouts.

Economic Overview

• GDP: Approximately 429.7 billion USD, with the economy maintaining high-speed growth.
• Ease of Doing Business: Ranks 70th globally, with the government continuously optimizing foreign investment policies.

Core Advantages

• Strategic Location: Adjacent to the South China Sea, with a long coastline, facilitating trade and logistics.
• Cost Competitiveness: Manufacturing labor costs are still lower than China’s coastal regions, with an abundant labor supply.
• Policy Support: The government offers tax reductions, simplified approvals (e.g., cancellation of 24 business restrictions), and other incentives to attract foreign investment.
• China-Vietnam Synergy: China is Vietnam’s largest trading partner, with bilateral trade exceeding 200 billion USD, facilitating the implementation of a “China Technology + Vietnam Manufacturing” model for Chinese enterprises.
• Key Investment Areas: Manufacturing (electronics, textiles), technology, consumer goods, infrastructure development.

II. Core Advantages and Challenges for Companies Expanding to Vietnam

1. Advantages

• Cost and Supply Chain Advantages: Low labor costs, proximity to China’s supply chain, allowing for efficient integration into global industrial chains.
• Market Potential: A young population drives consumption upgrades, a vast domestic market, and an ideal springboard for export-oriented economies.
• Policy Dividends: Foreign investment enjoys tax incentives, and investment procedures are continuously simplified.

2. Challenges

• Talent Skill Mismatch: Abundant basic labor, but a shortage of high-tech, managerial, and engineering talent, requiring investment in training or the introduction of foreign experts.
• Cultural and Language Barriers: Local employees have limited English proficiency, and Vietnamese workplace culture (e.g., communication styles, management expectations) differs from China’s, potentially affecting management efficiency.
• Compliance Complexity: Labor laws, taxation, and foreign employee visa regulations are strict and complex, posing high compliance risks (e.g., exceeding foreign employee ratios can lead to high fines).
• Dispersed Recruitment Channels: Requires a combination of online platforms, headhunters, local networks, and other multi-channel talent acquisition.

III. Employment Compliance Details: Costs and Obligations

When employing staff in Vietnam, employers must bear high mandatory social insurance contributions, which are a significant component of labor costs.

1. Mandatory Employer Contributions (additional labor costs): Totaling approximately 23.5% of the employee’s monthly salary

• Social Insurance (SI): 17.5% (including pension 14%, sickness and maternity 3%, work injury 0.5%). Contribution base ceiling is 20 times the minimum wage (46,800,000 VND/month).
• Health Insurance (HI): 3% (base ceiling same as SI).
• Unemployment Insurance (UI): 1% (only for Vietnamese employees, foreign nationals are exempt).
• Union Fee: 2% (employer contribution only, base ceiling 36,000,000 VND/month).

2. Mandatory Employee Deductions: Totaling approximately 10.5% of the monthly salary

• Social Insurance (SI): 8%
• Health Insurance (HI): 1.5%
• Unemployment Insurance (UI): 1% (only for Vietnamese nationals)
• Personal Income Tax (PIT): 5% - 35% (progressive tax rate, see below)

3. Employment Contracts and Working Hour Regulations

• Contracts: Must be in Vietnamese Dong (VND) and in writing, preferably bilingual (Vietnamese and English). Common contract types are indefinite-term and fixed-term (≤36 months).
• Working Hours: Standard is 48 hours per week (typically 8 hours per day, 6 days a week).
• Overtime Pay:
  • Weekdays: Not less than 150% of hourly rate
  • Weekends: Not less than 200% of hourly rate
  • Statutory Holidays: Not less than 300% of hourly rate
• Monthly overtime must not exceed 60 hours, and annual overtime must not exceed 300 hours.

4. Dismissal and Notice Period

• Notice Period: Depending on the contract type, 3 days (for contracts under 1 year) to 45 days (for indefinite-term contracts) advance notice.
• Severance Pay: Employees dismissed after 1 year of service are entitled to severance pay, calculated at half a month’s salary for each year of service.

IV. Work Visas: The Key to Entry for Foreign Employees

Vietnam implements a work permit system for foreign employees, approved by provincial labor departments. The core requirement is to prove that the position cannot be filled by a Vietnamese national.

1. Work Permit

• Requirements: University degree or 5 years of relevant work experience, sponsored by a Vietnamese company, and prior publication of local recruitment advertisements.
• Validity: Maximum 2 years, renewable once (for another 2 years).
• Exemptions: Those working for less than 3 months (holding a business visa), those married to Vietnamese citizens, etc., may be exempt.

2. Visa Types

• LD Visa: Requires a work permit, for experts, managers, etc.
• DN Visa: Business visa, for short-term business activities.
• Processing Time: The entire process (work permit + visa) takes 1-2 months, requiring advance preparation of notarized and authenticated documents such as criminal record certificates and health certificates.

3. Challenges

The process is cumbersome, approvals can be uncertain, and employers bear sponsorship responsibilities.

VI. Compensation and Benefits Overview

1. Minimum Wage: Divided by region (2025)

• Region I (Hanoi/Ho Chi Minh City): 4,960,000 VND/month
• Region IV (remote areas): 3,450,000 VND/month

2. Payroll Frequency

Can be paid weekly, bi-weekly, or monthly.

3. 13th-month Salary/Year-end Bonus

Common market practice, usually paid before the Lunar New Year (Tết).

4. Reference Annual Salaries for Popular Industries (VND)

• Sales Director: 1.5 billion - 3 billion
• Sales Manager: 700 million - 1.5 billion
• Entry-level Sales: 350 million - 800 million

VII. Leave System

• Annual Leave: 12 days of paid annual leave after 12 months of service (14-16 days for heavy-duty/hazardous occupations).
• Sick Leave: Depending on social insurance contribution years, 30-60 days of paid sick leave per year, with an allowance of 75% of salary.
• Maternity Leave: 6 months (for single birth), 100% of salary paid by the social insurance fund.
• Paternity Leave: 5-14 days (depending on delivery circumstances).
• Statutory Holidays: Approximately 10 days per year, including Lunar New Year (Tết), National Day, etc.

Summary

Vietnam, with its cost advantages, strategic location, and growth potential, is a popular choice for manufacturing and export-oriented enterprises. However, its complex and strict labor laws, high social insurance contributions, and cumbersome visa processes pose major challenges. For most companies, especially small and medium-sized or first-time overseas ventures, partnering with a professional Employer of Record (EOR) is the optimal strategy to mitigate risks and achieve efficient, compliant employment, allowing for rapid operational setup without the heavy burden of local legal entities.